Microfinance institutions are today reaching hundreds of millions of clients throughout the global South, but the special needs of Muslim borrowers and savers, who wish to avoid any form of fixed interest, are badly served. The purpose of Islamic Microfinance is to introduce readers to the tenets of Islamic finance and how they are applied to microfinance. It questions why, when mainstream Islamic finance is growing rapidly, are efforts to reach poor Muslim customers so far behind? Can Islamic microfinance as it grows maintain its original spirit of fairness, transparency and sharing, principles that seem to have been almost forgotten in the world of conventional microfinance?
The book contains fifteen detailed case studies of individual Islamic microfinance institutions, which include examples of successful and unsuccessful clients, and financial data about the performance of the institutions themselves. The case studies include institutions from Yemen, Afghanistan, Pakistan, India and Bangladesh, Indonesia, Sudan, Somalia, Kyrgyzstan, Palestine, and Kosovo.
The case study institutions are between them using a wide range of Shari’ah-compliant financing methods, which include pure interest-free loans, profit-sharing products and a variety of other tools, including micro-savings as well as micro-debt. In the accompanying commentary the editors critically examine the performance of the fifteen institutions and demonstrate how Islamic methods can efficiently satisfy the needs of some types of client but not all. It asks which types of products are affordable and beneficial, for which purposes and for whom.
This book is essential reading by all those interested in microfinance and development in the Muslim world, including researchers and students, ‘practitioners’ of microfinance, NGOs and multi-lateral and bi-lateral development agencies, and staff of development banks.

Preface
Malcolm Harper
1 Islamic financing principles and their application to microfinance
Ajaz Ahmed Khan, Bridget Kustin and Khalid Khan
Part one: Qard hasan – pure Islamic microfinance
2 Is it possible to provide qard hasan and achieve financial self-sustainability? The experience of Akhuwat in Pakistan
Ajaz Ahmed Khan, Muhammad Shakeel Ishaq, Joana Silva Afonso and Shahzad Akram
Part two: The predominance of murabaha
3 Pioneering Islamic microfinance in Kosovo: The experience of START
Ajaz Ahmed Khan and Vehbi Zeqiri
4 The Islami Bank Bangladesh’s Rural Development Scheme: “Need-based banking rather than greed-based micro-banking”?
Mohammed Kroessin
5 Providing an Islamic alternative: the experience of Mutahid in Afghanistan Hashmatullah Mohmand
6 The murabaha syndrome: Reef and Islamic microfinance in Palestine
Ajaz Ahmed Khan and Mohammed Ibrahim Elayyan
7 The experience of Kaah Islamic Microfinance Services in Somalia
Abdi Abdillahi Hassan
Part three: Institutions providing a range of Islamic financing arrangements
8 Al Amal Microfinance Bank in Yemen: Financial services in times of war
Abdullah Al-Kassim
9 The experience of Kompanion-Invest in the Kyrgyz Republic
Zamir Pusurov
10 Ebdaa Microfinance Bank: Musharaka for small-scale farmers in Sudan
Nawal Magzoub Abdallah
11 The Port Sudan Association for Small Enterprise Development in Sudan – an NGO ‘project’ and now a profitable business
Layla Omer Bashir
Part four: Institutions that also promote (some) profit and loss sharing
12 BASIX in Mewat, India – An Islamic experiment by a major Indian microfinance institution
Syed Zahid Ahmad, Anoop Kaul and S.N. Rahaman
13 MicroDahab in Somalia – A subsidiary of Africa’s largest remittance company Mohamed Ahmed Liban
14 The Al Khair Co-operative Credit Society: A co-operative Islamic microfinance institution
Najmul Hoda
15 Profit and loss sharing with smallholder farmers in Indonesia: The experience of PT Vasham Kosa Sejahtera
Irvan Kolonas and Timothy E. Rann
16 Co-operative Islamic microfinance: Daarul Qur’an BMT from Jakarta, Indonesia
Rio Sandi and Ajaz Ahmed Khan
17 What do the cases tell us?
Malcolm Harper

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Malcolm Harper Malcolm Harper taught at Cranfield School of Management until 1995, and since then has worked mainly in India. He has published on enterprise development and microfinance. He was Chairman of Basix Finance from 1996 until 2006, and is Chairman of M-CRIL, the microfinance credit rating agency.

Ajaz Ahmed Khan

Ajaz Ahmed Khan is Senior Microfinance Adviser with CARE International. He holds a PhD in Development Economics and has extensive experience of working in a diverse range of countries in Latin America, Eastern Europe, Asia and Africa. He has written widely on microfinance, Islamic microfinance in particular, as well as more generally on faith and development.